Fran O'Sullivan: Act ups the ante on era of entitlement

If party can get one or more seats in Parliament it could put raising the age for National Super back on agenda.

Jamie Whyte slammed "tax and spend" policies. Photo / Natalie Slade

The Act Party doesn't really register on the political Richter scale - yet.

But if the National Party cuts a pragmatic deal as the election nears to ensure Act gets one or more representatives into the next Parliament, it will be in a strong position to negotiate an agreement with a future National-led Government to start reversing what Australian Treasurer Joe Hockey calls the "Age of Entitlement".

In fact, getting Act into a position of relative strength might be the one avenue that would put raising the age of entitlement to National Superannuation in play with a future National-led Government as the current one refuses to contemplate this sensible move because John Key made an ill-judged promise not to change things.

It's something that most of the Western world is doing but New Zealand has so far neglected.

The "Age of Entitlement" is the slogan Hockey used in the run-up to last night's Australian Budget.

New Zealand doesn't face the same Budget difficulties as the Australian Liberal Government faces as it tries to get a handle on its exploding fiscal deficit. On the sectoral front, New Zealand axed considerable manufacturing industry and agricultural support years ago.

But there is a clear danger that successive New Zealand governments have already embedded a similar expectation of entitlement. Major companies have had a lot of government help in recent years. The expansion of Working for Families (WFF) at the 2005 election along with the decision of Helen Clark's Government to make student loans interest-free has ramped up the sense of entitlement on the personal front.

The WFF system might be justifiable for lower-income people. It is essentially a tax credits system which left-of-centre parties tend to overlook when they criticise the amount of tax paid by higher-income citizens.

It has to come from somewhere, guys - no taxes, no credits - but this seems to escape them.

The problem with the Labour Government's 2005 election bribes is that National - which denounced them in Opposition - simply adopted them on becoming the Government.

The upshot is a political Ponzi scheme where successive governments and their opponents keep ramping up the promises to voters to get elected into power but don't ask themselves sufficiently how well prepared they are to make good on those promises if economic conditions go pear-shaped.

Hockey's debut Budget went some way to addressing those issues within Australia as he wielded a strong axe to superfluous spending which he reckons has embedded a dangerous personal and company culture.

As he said at the weekend, "I say to you, emphatically, everyone in Australia must do the heavy lifting now.

"The age of entitlement is over. The age of personal responsibility has begun."

The spending cuts were relatively bold and courageous.

Australians are in no doubt that into the future, if they haven't made sufficient private savings, they can expect to work on until they are 70 before collecting the state pension.

Act leader Jamie Whyte wasn't quite so compelling when he launched his party's alternative Budget at a Belgian pub in Mt Eden last Saturday. Whyte had a fair slash at the "tax and spend" mentality of other political parties.

He did present a costed scenario spelling out how New Zealand could achieve a top income tax rate of 24 per cent and company tax rate of 24 per cent - without reducing spending for health, education or welfare for low-income earners.

On his agenda - selling all the resident state-owned assets including Kiwibank, KiwiRail and Landcorp. As well as privatising the NZ Super Fund - in essence using money realised from selling the fund (or liquidating it) to pay down government debt.

The Act plan also included shutting down various government departments like Women's Affairs and Tourism.

Axing Callaghan Innovation and other grants to business and cutting the subsidies that have kept the movie industry (and Sir Peter Jackson) thriving.

The biggest message is Act's determination that the interest should go back on student loans and that the National Super entitlement age should be raised to 67 years with increases indexed to inflation rather than wage levels.

What Act didn't attack - and could usefully do so - is the ability to increase the revenue from polluting industries and those that get the upside of the trade agreements that the Government negotiates on New Zealanders' behalf.

Whyte and Co have had the guts to have a poke at the status quo.

With Labour doing similarly - from another direction - it ups the pressure on the incumbent Government to do some fresh thinking of its own.

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.